Just when you think you may have a moment to catch your breath…

Perhaps no one rejoiced more than mortgage compliance officers at the change in leadership and tone (no more “regulation by enforcement”) at the Consumer Financial Protection Bureau.  Several years of earth-shattering changes at breakneck speed, combined with hard-hitting enforcement tactics has left many teams overwhelmed.

However, before you break out the Champagne, consider that regulators in trend-setting states like California, New York, and others now see a need to ramp up efforts to fill a perceived gap. 

Recently, 17 state attorneys general sent a letter to CFPB Acting Director Mick Mulvaney expressing their desire to see a more aggressive attitude from the agency.  This poses a significant challenge to multi-state lenders and their compliance officers.

What can lenders learn from recent AG settlements in Massachusetts and California? 

Nationstar settled with Massachusetts over servicing-related abuses, and California’s AG and regulator have aggressively challenged the servicing practices of a number of companies, resulting in millions in fines, and even threats to suspend licenses.  In particular, state AGs and regulators are clearly focusing on mortgage modification practices. 

How will the establishment of new CFPB-like agencies in states across the country change the equation? 

New Jersey’s new Division of Consumer Affairs will be headed up by Paul Rodriguez, formerly acting counsel to New York City Mayor Bill de Blasio.  States like New Jersey and Pennsylvania are signaling their intent to fill regulatory “voids” left by a kinder, gentler CFPB. 

Additionally, states are beginning to change their licensing laws in an effort to provide greater supervisory and investigative power to regulators.  Even request for information during state exams are becoming more and more challenging to comply with, and the stakes have never been higher – just ask fellow mortgage bankers who have found themselves on the wrong end of a state exam.

While rising rates, industry consolidation, and activity in Washington continues to garner the headlines and front pages, mortgage lenders must still keep a close watch on state regulators.

[NOTE: The California MBA’s Mortgage Quality & Compliance Committee (MQAC) is providing a free webinar on May 24th at 11 am (Pacific) on the topic of state regulatory issues, and will feature Monika L. McCarthy of CrossCheck Compliance and Kathleen “Kitty” Ryan of Akerman, LLP.  Click here to register.]